Bangalore real estate rings in new year with PE deals

BANGALORE: Just 45 days into the New Year and Bangalore is seen to be racing ahead in attracting private equity investments in the real estate sector. Many deals topping $10 million (above Rs 60 crore) have been concluded or are in advance stages of closing, said multiple industry sources.

Last year too, the IT capital attracted the lion's share of private equity real estate funding, outpacing all other metro markets and attracting three times the share of investment received by secondplaced Pune.

An investment arm of the Aditya Birla Group has just concluded a $17 million (above Rs 100 crore) equity deal with Shriram Properties , wherein the Birla entity will hold a 49% stake in an upcoming Shriram residential development located along Old Madras Road. TOI was the first to report on this impending deal in January. Another top Bangalore developer, the Vaswani Group, has got $10 million funding from J P Morgan, said a source citied earlier. The source added that Milestone Capital Advisors, with assets under management of Rs 3,200 crore, is said to be in advance discussions over a $10 million structured financing deal with Fortuna Projects. Fortuna is also in preliminary discussions with Motilal Oswal Private Equity for a similar sized structured investment at the project level.

Repeated attempts by TOI to reach out to Arun Advani, joint MD, Vaswani Group, and Naresh Kumar, CMD, Fortuna Projects, for a comment met with no response. M Murali, MD, Shriram Properties, declined to comment on the Birla deal, but said that fund houses were actively pursuing investment opportunities in the southern residential markets of Chennai and Bangalore.

"Bangalore and Chennai are seeing a healthy absorption of residential units due to fresh jobs being created," said Rajeev Bairathi executive director, Capital Transaction Group, Knight Frank India. Both the southern metros cumulatively absorbed over 12 million sqft of fresh office space last calendar.

In the last two years, Bangalore in particular has been reporting a 15% to 20% growth in absorption of residential units largely due to a stable price regime. Shobhit Agarwal, MD, Capital Markets , Jones Lang LaSalle India , said that absorption and capital value appreciation in Bangalore have been in sync with each other, as opposed to the scenario in the two big markets of Mumbai and NCR.

Absorption growth in Mumbai and NCR has taken a hit on account of a 50% to 60% appreciation in residential prices in the last 24 months. "Private equity investors are extremely cautious with both markets due to the overhang of inventory," added Bairathi .

Bangalore's buoyant residential market is also reflected in the impressive revenue and profit growth reported by listed city-based developers in the October to December quarter. Nitesh Estates reported a 319% jump in revenue and a seven-fold increase in net profit, Sobha Developers reported a revenue and profit growth of 26% and 10% respectively. Prestige Estates Projects, south India's largest developer, sold 1,204 residential units and 26,000 sqft of commercial space aggregating to sales of Rs 1, 260 crore in the December quarter.

Heavy fund flow

Many deals topping $10 million (above Rs 60 crore) have been concluded or are in advance stages of closing In last two years, Bangalore has seen 15-20 % growth in absorption of residential units Last year too, Bangalore attracted the lion's share of private equity real estate funding City-based developers have reported impressive revenue and profit growth in the Oct-Dec quarter.

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